Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2018

Basis of Accounting, Policy [Policy Text Block]

Basis of Presentation:

The accompanying unaudited consolidated interim financial statements have been prepared in accordance with Article

of Regulation S-

“Interim Financial Statements” and the rules and regulations for Form

-Q of the Securities and Exchange Commission (the “SEC”). Pursuant to those rules and regulations, the Company has condensed or omitted certain information and footnote disclosure it normally includes in its annual consolidated financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”).

In management’s opinion, the Company has made all adjustments (consisting only of normal, recurring adjustments, except as otherwise indicated) necessary to fairly present its consolidated financial position, results of operations and cash flows. The Company’s interim period operating results do

not

necessarily indicate the results that

may

be expected for any other interim period or for the full fiscal year. These financial statements and accompanying notes should be read in conjunction with the

2017

consolidated financial statements and notes thereto included in the Company’s Annual Report on Form

-K for its fiscal year ended

December 31, 2017

filed with the SEC on

February 13, 2018 (

the

“2017

Form

-K”). There have been

changes in the significant accounting policies from those that were disclosed in the audited consolidated financial statements for the fiscal year ended

December

31,

2017

included in the

2017

Form

-K, except as follows:

Effective as of

January 1, 2018,

the Company adopted Accounting Standards Update

2014

09,

“Revenue from Contracts with Customers” (“ASU

606”

) on a full retrospective basis which requires the Company to restate its historical financial information for fiscal year

2017

and to be consistent with the new standard in

2018.

The Company implemented internal controls and key system functionality to enable the preparation of financial information upon adoption. ASU

606

provides enhancements to the quality and consistency of how revenue is reported while also improving comparability in the financial statements of companies reporting using IFRS and US GAAP. The core principle of the standard is for companies to recognize revenue to depict the transfer of goods or services to customers in amounts that reflect the consideration (that is, payment) to which the company expects to be entitled in exchange for those goods or services. The most significant impacts of the standard to the Company relate to the timing of revenue recognition for arrangements involving term licenses and sales commissions. Under ASU

606,

the Company is required to recognize term license revenues upon the transfer of the license and the associated maintenance revenues over the contract period, as opposed to the Company’s prior practice of recognizing both the term license and maintenance revenues ratably over the contract period. In addition, the Company is required to capitalize and amortize incremental costs of obtaining a contract, such as certain sales commission costs, over the remaining contractual term or over an expected period of benefit, which the Company has determined to be approximately

four

years. Previously, the Company did

not

capitalize sales commission costs but rather recognized these costs when they were incurred.

Adoption of the standard results in a reduction of revenues of

$1,974

for the year ended

December 31, 2017

primarily due to the net change in term license revenue recognition. As of

December 31, 2017,

the adoption of the standard results in an increase in deferred commission of

$13,486,

a decrease in short-term deferred revenues of

$398,

a decrease in long-term deferred revenues of

$426

and an increase of

$1,246

in deferred tax liabilities. This is a result of the capitalization of sales commission costs and the upfront recognition of license revenues from term licenses. The cumulative impact to the Company’s accumulated deficit as of

December 31, 2017

is a reduction of

$13,064.

Adoption of the standard related to revenue recognition had

impact to cash from or used in operating, financing or investing activities on the Company’s consolidated statements of cash flows.

The Company adjusted its consolidated financial statements from amounts previously reported due to the adoption of ASU

606.

Select consolidated statement of operations, consolidated balance sheet and consolidated statement of cash flows, which reflect the adoption of the new standard are as follows:

	Three Month Ended March 31, 2017
	As Reported			Adjustments			As Adjusted
License revenues	$	19,155		$	(1,063	)	$	18,092
Maintenance and service revenues		21,225			276			21,501
Total revenues		40,380			(787	)		39,593
Cost of revenues		4,672			21			4,693
Gross profit		35,708			(808	)		34,900
Operating costs and expenses:
Research and development		10,409			-			10,409
Sales and marketing		30,811			103			30,914
General and administrative		5,513			(4	)		5,509
Total operating expenses		46,733			99			46,832
Operating loss		(11,025	)		(907	)		(11,932	)
Financial income, net		469			-			469
Loss before income taxes		(10,556	)		(907	)		(11,463	)
Income taxes		(323	)		123			(200	)
Net loss	$	(10,879	)	$	(784	)	$	(11,663	)

	December 31, 2017 Balance Sheet Data
	As Reported			Adjustments			As Adjusted
Assets
Current assets:
Prepaid expenses and other current assets	$	7,130		$	7,216		$	14,346
Long-term assets:
Other assets	$	973		$	6,270		$	7,243

Liabilities and stockholders’ equity
Current liabilities:
Deferred revenues	$	73,891		$	(398	)	$	73,493
Long-term liabilities:
Deferred revenues	$	7,034		$	(426	)	$	6,608
Other liabilities	$	6,561		$	1,246		$	7,807
Stockholders’ equity:
Accumulated deficit	$	(122,454	)	$	13,064		$	(109,390	)

	Statement of Cash Flows Three Month Ended March 31, 2017
	As Reported			Adjustments			As Adjusted
Cash flows from operating activities
Net loss	$	(10,879	)	$	(784	)	$	(11,663	)
Amortization of deferred commissions	$	-		$	3,027		$	3,027
Deferred commissions	$	-		$	(2,906	)	$	(2,906	)
Deferred revenues	$	(3,203	)	$	786		$	(2,417	)
Other long term liabilities	$	(418	)	$	(123	)	$	(541	)
Net cash provided by operating activities	$	8,297		$	-		$	8,297

Revenue Recognition, Policy [Policy Text Block]

Revenue Recognition:

The Company generates revenues in the form of software license fees and related maintenance and services fees. License fees include perpetual license fees and term license fees which provide customers with the same functionality and differ mainly in the duration over which the customer benefits from the software. Maintenance and services primarily consist of fees for maintenance services (including support and unspecified upgrades and enhancements when and if they are available) and to a lesser extent professional services which focus on both deployment and training the Company’s customers to fully leverage the use of its products although the user can benefit from the software without the Company’s assistance. The Company sells its products worldwide directly to a network of distributors and VARs, and payment is typically due within

calendar days of the date the Company issues an invoice.

The Company recognizes revenues in accordance with ASC

No.

606,

“Revenue from Contracts with Customers”. As such, the Company identifies a contract with a customer, identifies the performance obligations in the contract, determines the transaction price, allocates the transaction price to each performance obligation in the contract and recognizes revenues when (or as) the Company satisfies a performance obligation.

Software license revenues are recognized at the point of time when the software license has been delivered.

The Company recognizes revenues from maintenance ratably over the term of the underlying maintenance contract term. The term of the maintenance contract is usually

one

year. Renewals of maintenance contracts create new performance obligations that are satisfied over the term with the revenues recognized ratably over the term.

Revenues from professional services consists mostly of time and material services. The performance obligations are satisfied, and revenues are recognized, when the services are provided or when the service term has expired.

In contracts with multiple performance obligations, the Company accounts for individual performance obligations separately if they are distinct. The Company allocates the transaction price to each performance obligation based on its relative standalone selling price out of total consideration of the contract. For maintenance and support, the Company determines the standalone selling price based on the price at which the Company separately sells a renewal contract. The Company determines the standalone selling price for sales of licenses using the residual approach. For professional services, the Company determines the standalone selling prices based on the price at which the Company separately sells those services.

Trade and other receivables are primarily comprised of trade receivables that are recorded at the invoice amount, net of an allowance for doubtful accounts.

Deferred revenues represent mostly unrecognized fees billed or collected for maintenance and professional services. Deferred revenues are recognized as (or when) the Company performs under the contract. The amount of revenues recognized in the period that was included in the opening deferred revenues balance was

$27,952

for the

three

months ended

March

31,

2018.

The Company does

not

grant a right of return to its customers, except for

one

of its resellers. In

2017

and for the

three

months ended

March 31, 2018,

there were

returns from this reseller.

The Company pays commissions to sales and marketing and certain management personnel based on their attainment of certain predetermined sales goals. Sales commissions are considered incremental costs of obtaining a contract with a customer and are deferred and amortized. The Company is required to capitalize and amortize incremental costs of obtaining a contract, such as certain sales commission costs, over the remaining contractual term or over an expected period of benefit, which the Company has determined to be approximately

four

years. Amortization expenses related to these costs are included in sales and marketing expenses in the accompanying consolidated statements of operations.

For information regarding disaggregated revenues, please refer to note

Derivatives, Policy [Policy Text Block]

Derivative Instruments:

The Company’s primary objective for holding derivative instruments is to reduce its exposure to foreign currency rate changes. The Company reduces its exposure by entering into forward foreign exchange contracts with respect to operating expenses that are forecast to be incurred in currencies other than the U.S. dollar. A majority of the Company’s revenues and operating expenditures are transacted in U.S. dollars. However, certain operating expenditures are incurred in or exposed to other currencies, primarily the New Israeli Shekel (“NIS”).

The Company has established forecasted transaction currency risk management programs to protect against fluctuations in fair value and the volatility of future cash flows caused by changes in exchange rates. The Company’s currency risk management program includes forward foreign exchange contracts designated as cash flow hedges. These forward foreign exchange contracts generally mature within

months. The Company does

not

enter into derivative financial instruments for trading purposes.

Derivative instruments measured at fair value and their classification on the consolidated balance sheets are presented in the following table (in thousands):

	Liabilities as of March 31, 2018 (unaudited)					Assets as of December 31, 2017
	Notional Amount		Fair Value			Notional Amount		Fair Value

Foreign exchange forward contract derivatives in cash flow hedging relationships - included in other current assets and accrued expenses and other short term liabilities	$	44,348	$	(2,029	)	$	1,746	$	163

For the

three

months ended

March 31, 2018

and

2017,

the unaudited consolidated statements of operations reflect a gain of approximately

$48

and

$265,

respectively, related to the effective portion of foreign currency forward contracts.

Any

ineffective portion of foreign currency forward contracts is recognized in financial income (expense), net in the unaudited consolidated statement of operations.

material ineffective hedges were recognized in other income (expenses) for the

three

months ended

March 31, 2018

and

2017.

Cash, Cash Equivalents and Short-term Investments, Policy [Policy Text Block]

Cash, Cash Equivalents and Short-Term Investments:

The Company accounts for investments in marketable securities in accordance with ASC

No.

320,

“Investments—Debt and Equity Securities”. The Company considers all highly liquid investments with a maturity of

three

months or less when purchased to be cash equivalents. Cash and cash equivalents consist of cash on hand, highly liquid investments in money market funds and various deposit accounts.

The Company considers all high quality investments purchased with original maturities at the date of purchase greater than

three

months to be short-term investments. Investments are available to be used for current operations and are, therefore, classified as current assets even though maturities

may

extend beyond

one

year. Cash equivalents and short-term investments are classified as available for sale and are, therefore, recorded at fair value on the consolidated balance sheet, with any unrealized gains and losses reported in accumulated other comprehensive income (loss), which is reflected as a separate component of stockholders’ equity in the Company’s consolidated balance sheets, until realized. The Company uses the specific identification method to compute gains and losses on the investments. The amortized cost of securities is adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization and accretion is included as a component of financial income, net in the consolidated statement of operations. Cash, cash equivalents and short-term investments consist of the following (in thousands):

	As of March 31, 2018 (unaudited)
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Loss			Fair Value

Cash and cash equivalents
Cash	$	61,749	$	-	$	-		$	61,749
Money market funds		9,029		-		-			9,029
Total	$	70,778	$	-	$	-		$	70,778

Short-term investments
US Treasury securities	$	37,751	$	-	$	(34	)	$	37,717
Term bank deposits		45,175		-		-			45,175
Total	$	82,926	$	-	$	(34	)	$	82,892

All the US Treasury securities in short-term investments have a stated effective maturity of less than

months as of

March 31, 2018.

	As of December 31, 2017
	Amortized Cost		Gross Unrealized Gains			Gross Unrealized Loss			Fair Value

Cash and cash equivalents
Cash	$	49,819	$	-		$	-		$	49,819
Money market funds		6,870		-			-			6,870
Total	$	56,689	$	-		$	-		$	56,689

Short-term investments
US Treasury securities	$	39,758		*	)		(27	)	$	39,731
Term bank deposits		40,137		-			-			40,137
Total	$	79,895	$	*	)	$	(27	)	$	79,868

*) Represents an amount lower than

The gross unrealized loss related to these short-term investments was due primarily to changes in interest rates. The Company reviews its short-term investments on a regular basis to evaluate whether or

not

any security has experienced an other than temporary decline in fair value. The Company considers factors such as length of time and extent to which the market value has been less than the cost, the financial condition and near-term prospects of the issuer and its intent to sell, or whether it is more likely than

not

the Company will be required to sell the investment before recovery of the investment’s amortized cost basis. If the Company believes that an other than temporary decline exists in

one

of these securities, the Company writes down these investments to fair value. For debt securities, the portion of the write-down related to credit loss would be recorded to other income (expense), net in the Company’s consolidated statements of operations. Any portion

not

related to credit loss would be recorded to accumulated other comprehensive income (loss), which is reflected as a separate component of stockholders’ equity in the Company’s condensed consolidated balance sheets. During the

three

months ended

March 31, 2018,

the Company did

not

consider any of its investments to be other-than-temporarily impaired.

Cash and Cash Equivalents, Restricted Cash and Cash Equivalents, Policy [Policy Text Block]

f. Restricted Cash:

November 2016,

the Financial Accounting Standards Board (the “FASB”) issued ASU

2016

18,

“Statement of Cash Flows (Topic

230

): Restricted Cash”, which requires companies to include amounts generally described as restricted cash and restricted cash equivalents in cash and cash equivalents when reconciling beginning-of-period and end-of-period total amounts shown on the statement of cash flows. ASU

2016

is effective for annual and interim periods beginning after

December 15, 2017.

The Company adopted this standard effective

December 31, 2017

using the retrospective transition method, as required by the new standard. The adoption of this standard had an immaterial impact on the Company’s consolidated statements of cash flows.

The following table provides a reconciliation of cash and cash equivalents, and long term restricted cash reported within the consolidated balance sheets that sum to the total of such amounts in the consolidated statements of cash flows:

	March 31, 2018		March 31, 2017
Cash and cash equivalents	$	70,778	$	51,070
Long term restricted cash included in other assets		546		517
Cash, cash equivalents and long term restricted cash shown in the consolidated statement of cash flows	$	71,324	$	51,587

New Accounting Pronouncements, Policy [Policy Text Block]

g. Recently Issued Accounting Pronouncements:

January 2016,

the FASB issued ASU

2016

13,

“Financial Instruments – Credit Losses on Financial Instruments”, which requires that expected credit losses relating to financial assets measured on an amortized cost basis and available for sale debt securities be recorded through an allowance for credit losses. ASU

2016

limits the amount of credit losses to be recognized for available for sale debt securities to the amount by which carrying value exceeds fair value and also requires the reversal of previously recognized credit losses if fair value increases. The new standard will be effective for interim and annual periods beginning after

January 1, 2020,

and early adoption is permitted. The Company is currently evaluating whether to early adopt this standard and the potential effect on its consolidated financial statements.

February 2016,

the FASB issued ASU

2016

02,

“Leases”, on the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e., lessees and lessors). The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or

not

the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight line basis over the term of the lease, respectively. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than

months regardless of their classification. Leases with a term of

months or less will be accounted for in a manner similar to the accounting under existing guidance for operating leases today. The new standard requires lessors to account for leases using an approach that is substantially equivalent to existing guidance for sales-type leases, direct financing leases and operating leases. The new standard supersedes the previous leases standard, ASC

840,

"Leases". The guidance is effective for the interim and annual periods beginning on or after

December

15,

2018,

and early adoption is permitted. The Company is currently evaluating whether to early adopt this standard and the potential effect of the guidance on its consolidated financial statements.

January 2018,

the FASB released guidance on the accounting for tax on the global intangible low-taxed income (“GILTI”) provisions of the Tax Cuts and Jobs Act (“TCJA”). The GILTI provisions impose a tax on foreign income in excess of a deemed return on tangible assets of foreign corporations. The guidance indicates that either (i) accounting for deferred taxes related to GILTI inclusions, or (ii) treating any taxes on GILTI inclusions as period cost, are both acceptable methods subject to an accounting policy election. In accordance with SEC Staff Accounting Bulletin

No.

118,

and as the Company is

not

yet able to reasonably estimate the effect of the GILTI tax, as described in note

of the Company’s

2017

consolidated financial statements included in the

2017

Form

-K, the Company has

not

yet adopted an accounting policy with respect to the GILTI tax.